It seems like most debit cards will be safe from the monthly carrying fee that was imposed by some banks during the third quarter of 2011. Consumer outrage caused such a backlash that the financial institutions have had second thoughts and rescinded the new debit card fees.
The second biggest bank in the United States, Bank of America, announced in September that it would start charging a $5.00 monthly fee to their clients who use their debit cards after the first of the year. As they disclosed that the new debit card fees would be waived for customers who had premium accounts or held large balances in their accounts, the customers who did not qualify for the waivers became enraged. To many, it seemed that only consumers with lesser amounts of money would have to carry the burden of having to make up the profits that the bank lost because of federal limits on “swipe fees”. The backlash caused the Bank of America to step back from the proposed monthly fee and announced that they were no longer considering adding the new debit card fee for usage.
Are Debit Cards Losing Favor?
Before the new federal regulations on “swipe fees” limited the amount that the financial institutions were able to charge at the point of sales, banks encouraged their customers to use the bank debit cards because of the profits they were able to glean each time a consumer pull the piece of plastic from their wallet to make a purchase. With the banks charging the merchant an average of 44 cents each time the customer paid with the debit card, the fees amounted to millions of dollars a year in profits for the larger banks. On October 1st, the new regulations limited the transaction fee to only 24 cents per swipe, and much of the profits, amounting to billions of dollars across the industry, were lost.
According to financial analysts, financial institutions hoped that they could get some of the profits back by charging new debit card fees and by making the use of credit cards more popular. In many cases, the additional fees on the cards would make it seem like the credit cards were cheaper to use. Banks make more money when credit cards are used than when debit cards are used, monthly usage fees or not.
Bank of America was not the only bank that had plans for the debit card. According to news reports, Regions, Sun Trust and Wells Fargo all canceled plans to add new debit card fees or to test the feasibility of adding carrying fees to the cards as angry consumers threatened to close their accounts and switch to other financial institutions.
Now that the plans for the monthly fee on the popular debit cards seem to have been put to rest, consumers should still be wary of other attempts by banks to recoup the profits that have been lost. Pay special attention to any changes to the fees that are already in place at your bank. Check the amount you are asked to agree to pay when you use your debit card for cash at an ATM machine. Carefully read any notice of changes of fees that are charged for your online transactions and make sure that the requirements for minimum balances in your bank accounts to avoid fees do not change.